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School district consolidation: Market concentration and the scale‐efficiency tradeoff
Author(s) -
Gronberg Timothy J.,
Jansen Dennis W.,
Karakaplan Mustafa U.,
Taylor Lori L.
Publication year - 2015
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/soej.12029
Subject(s) - inefficiency , consolidation (business) , economies of scale , economics , competition (biology) , school district , land consolidation , microeconomics , finance , geography , ecology , agriculture , archaeology , biology , psychology , pedagogy
Consolidation is often proposed as a strategy for increasing school district quality without increasing educational funding. However, if consolidation reduces competition in the local school market and reduces efficiency, any savings from exploiting economies of scale may be lost to increased inefficiency. We use a stochastic cost function to investigate these effects for districts in Texas. We find important economies of scale, but we also find that increased market concentration leads to increased cost inefficiency. Finally, we illustrate the practical importance of these two potentially offsetting factors in a simulation that considers consolidating Texas school districts to county‐level districts. We find that failure to consider the effect on competition can lead to large overestimates of the benefits of consolidation.